Loan Against Mutual Funds

Unlock instant liquidity without redeeming your investments. A smart, cost-effective way to meet your financial needs.



What is a Loan Against Mutual Funds?

A Loan Against Mutual Funds (LAMF) is a type of secured loan where your mutual fund units are pledged as collateral to a lender — such as a bank or Non-Banking Financial Company (NBFC). Instead of selling your funds, you temporarily offer them as security and get access to cash for urgent needs. The best part? Your investments continue to earn returns during the loan period.

How Does It Work?

Here’s a simple breakdown of the process:

  1. Apply for a loan with a bank or NBFC that offers LAMF services.
  2. Pledge your mutual fund units via the National Securities Depository Limited (NSDL) or Central Depository Services Limited (CDSL).
  3. The lender evaluates the Net Asset Value (NAV) of your holdings and approves a percentage of that value (usually 50%–70%).
  4. The approved loan amount is transferred to your bank account.
  5. Continue paying interest as per the loan agreement. Once you repay, your mutual fund units are released back to you.

Key Advantages of LAMF

  • No Sale of Assets: Keep your long-term investments intact while accessing cash.
  • Lower Interest Rates: Since this is a secured loan, rates are generally lower than personal loans or credit cards.
  • Quick Processing: Many lenders disburse funds within 24–48 hours after verification.
  • Flexibility: Use the loan for emergencies, business expansion, education, or personal needs.

Things to Keep in Mind

  • Loan-to-Value Ratio: The amount you get depends on your mutual fund’s NAV and lender’s policy.
  • Market Risk: If NAV drops during the loan period, you might have to pledge more units or repay part of the loan.
  • Locked Units: Pledged units can’t be redeemed until the loan is closed.
  • Fees and Charges: Always check processing fees, interest rate, and prepayment rules.

Example Scenario

If you have ₹10 lakh worth of mutual funds and the lender allows 60% loan-to-value, you can borrow ₹6 lakh. This gives you liquidity for your needs while your portfolio continues to grow.

Click here to Eligibility

Looking for a Loan Against Mutual Funds?

Astick Bid Capital & Investments can help you access funds without disturbing your investment goals. We guide you through the process, ensuring transparency and quick execution.

Post a Comment